No inflationary pressure in budget, say experts

March 31, 2014 - 1:22:55 am

BY MOHAMMAD SHOEB

DOHA: A significant 16.8 percent increase in the budgetary allocation dedicated to the implementation of key development projects for the financial year 2014-15 will not have any inflationary pressure, say experts from the industry.

They believed that it would rather stimulate the pace of economic growth and have a multiplier effect for creating more opportunities for investments and employment.

According to the budgetary provisions, the government has announced to allocate QR87.5bn dedicated to the completion and implementation of key development projects, up by 16.8 percent from the previous budget.

“I strongly believe that the monetary and fiscal policies, with the close cooperation of Qatar Central Bank, will be able to control any inflationary pressure, price rise, if any, very effectively,” said Remy Rowhany, Director General of Qatar Chamber.

However, some analysts believe that, in principle, any sharp rise in public expenditure may result in “demand-pull” inflation in the economy as too much money will be chasing too few goods. Demand-pull inflation is asserted to arise when aggregate demand outpaces aggregate supply. It involves inflation rising as real GDP rises and unemployment falls.

Rowhany said that increasing public expenditure on the mega infrastructure projects will not have any adverse impact, or inflationary pressure on rentals and the prices of primary raw materials used in construction sector.

He added: “Qatar is not releasing all the projects at one go. So it will not have any problem… At times there can be some leakages in these systems, and controlling inflation may become a Herculean task, but our Finance Minister, bolstered with a team of professional experts and consultants, is very much capable of controlling on such situations.”

Dr R Seetharaman, Group CEO of Doha Bank, also allayed the apprehensions related to inflationary pressure, and said: “This is a very good budget with well founded economic fundamentals. This will further accelerate the pace of economic growth and create more opportunities for businesses and investments in all sectors of the economy.”

Dr Seetharaman, who is an expert on Qatar’s macro economic fundamentals, and also keeps a close tab on global economic outlook, said: “The rise in budgetary allocation is a very welcome move. It is a win-win situation for all. It will be supported by growing population which will have a positive impact on the aggregate demand in the economy.

He also said the allocation is in line with the well calculated Urban Development Planning and Qatar National Vision 2013 under which the country is striving to diversify its economy and development human capital by investing heavily on education, health, sports and infrastructure which include roads, airport and seaport.” The Peninsula